3.3 Procurement

Question 1

Characteristics of procurement strategy

Answer 1

• Mechanics and rules of purchasing goods / services
• Defines supplier selection process
• Identifies national and international regulations and guidance
• Identifies delegated authority
• Maintains project budget
• Objective, open, fair supplier selection

Question 2

Content of a procurement strategy

Answer 2

1. Make or Buy
2. Contractual relationship
3. Payment mechanism
4. Supplier selection

Question 3

Types of contractual relationships in a procurement strategy

Answer 3

• Single contract
• Parallel contracts
• Prime contract
• Transactional
• Collaborative
• New Engineering Contract / Joint Contract Tribunal

Question 4

Types of payment mechanisms in a procurement strategy

Answer 4

• Fixed price
• Cost plus fee
• Per unit
• Target cost

Question 5

Stages of a competitive procurement process

Answer 5

1. Research
2. Pre-qualification
3. Tender
4. Respond to queries
5. Evaluate bids
6. Award contract
7. Manage
8. Close

Question 6

Characteristics of negotiation

Answer 6

• Process to reach agreement
• Formal - pre-agreed and measured process
• Informal - relaxed, more collaborative

Question 7

Stages of a negotiation process

Answer 7

1. Identify need
2. Analyse (BATNA, ZOPA)
3. Actual negotiation
4. Document agreement
5. Monitor agreement

Question 8

Payment methods - risk to customer

Answer 8

• Fixed price - low financial, higher schedule / quality
• Per unit qty - high financial risk
• Cost plus fee - high financial risk (final cost unknown)
• Target cost - shared risks

Question 9

Payment methods - scope

Answer 9

• Fixed price - known and fully documented
• Price unit qty - exact quantities unknown
• Cost plus fee - known
• Target cost - unknown

Question 10

Payment methods - Contract price

Answer 10

• Fixed price - agreed before work starts
• Per unit qty - agreed per unit before work starts
• Cost plus fee - derived once work completed
• Target cost - derived once work completed

Question 11

Payment methods - cost

Answer 11

• Fixed price - higher as supplier carries risk overhead
• Per unit qty - unknown
• Cost plus fee - costs go up over time
• Target cost - reduced cost preferred

Question 12

Payment methods - Relationships

Answer 12

• Fixed price - transactional, no active management
• Per unit qty - more collaborative, ongoing relationship
• Cost plus fee - more active management
• Target cost - collaborative relationship